from the state budget and had not paid due taxes. Their liquidation took only a single day. The liquidation of a company is virtually impossible in one day even if it has a turnover of 5,000. It takes years. Nobody checked the debtors, creditorsor liabilities. The matter was cleared up in a single day.”FactCheck
inquired about the accuracy of the factsindicated in the statement.
On a yearly basis, the Doing Business project provides measures of business regulations in 189 countries. As the joint research of the World Bank and the International Finance Organisation, it analyses the regulations of starting a business, trading across borders, paying taxes and resolving insolvency. The project ranks economies on their overall “ease of doing business” across ten topics.
The 2014 Doing Business report ranks Georgia as the eighth among 189 countries according to the ease of doing business, moving it up from the ninth position held in the previous year.Pursuant to the report, Georgia preserves the second position in the ranking of countries by dealing with construction permits, it takes up the first place by the simplicity of registering a property, third – by the easiness of getting a loan and 16th – by protecting investors; in terms of paying taxes, Georgia was advanced by three positions, moving up from 32nd to 29th. Georgia’s rank was raised in terms of trading across borders as well, going from the 45th position up to the 43rd. Based upon the enforcement of contracts, Georgia occupies the 33rd position while in the ranking of resolving insolvency, Georgia shifted from the 92nd place up to the 88th,
improving its position by four levels.In the 2014 Doing Business report, which measures the economies of 189 countries across the world based upon the easiness of conducting business, the leading first position is granted to Singapore while the last one is occupied by Chad. Georgia’s neighbour Armenia is ranked 37th while Azerbaijan is 70th and Russia’s indicators measure up to the 92nd position. Ukraine ranked 112th and Turkey – 69th. According to Khaduri’s statement, despite holding the eighth position in the Doing Business ranking, shutting down a business in Georgia is “the hardest of all.” In actuality, Georgia occupies the 88thposition in the ranking according to the easiness of bankruptcy procedures and its indicator has been improved by four positions relative to the last year. The ranking covers a total of 189 countries; the 88th
position certainly is not one of a leader but roughly represents an indicator of a medium range. According to this indicator, the shutdown of a business requires an average of two years in Georgia.FactCheck
examined the prescribed procedure for the liquidation of an enterprise.
The procedure for the liquidation of an enterprise is regulated by Article 14 of the Law on Entrepreneurs: an entrepreneur is to register the decision about the liquidation of an enterprise in the registry of entrepreneurial and non-entrepreneurial legal entities. The liquidation process is considered to be initiated at the moment of registration. Following the registration, the regulatory body forwards the information on the intended liquidation of an enterprise to the Revenue Service of Georgia. Within a period of ten days the Revenue Service informs the registering body on the existing threat of taxation liabilities on the part of the enterprise. The provided information needs to include indications on the defined terms for conducting a tax audit and investigating outstanding tax liabilities. The term is not to exceed 90 days. If necessary, the abovementioned 90 days can be extended by 60 days only once. In the case if the defined terms for the provision of information on the threats of outstanding tax liabilities and for conducting a tax audit are breached, the enterprise is considered free of tax liabilities. After all the abovementioned procedures are completed and the enterprise is freed of all tax liabilities, it is conceived to be liquidated.
It is to be noted that the liquidation process of enterprises used to drag on for years. In pursuance of simplifying this procedure, on 3 November 2009, amendments were made to the Law on Entrepreneurs which introduced changes in the terms of liquidation as well. These amendments specified the terms for the completion of the liquidation process of an enterprise: liquidation is to be concluded no more than four months after the initiation of the liquidation process is registered. In the case if the term for carrying out the tax audit is prolonged, the liquidation process needs to be completed no later than one month after receiving information on the concluded tax audit.
As gathered from the above-given information, the liquidation process for an enterprise is still fairly long and complicated. An enterprise may not be functioning factually any more, but still persist as a legal entity, as the liquidation procedure is quite lengthy.
Trying to establish how many companies had been shut down in the period from 1 through 5 October 2012, we addressed an official letter to the Department for Registration of Entrepreneurs and Non-Entrepreneurial Legal Entities at the National Agency of the Public Registry. In line with the received response, only two companies were liquidated in the period from 1 to 5 October 2012: Limited Liability Company – Cleaning and Organisation of Public Services and Amenities atthe Akhalgori Municipality B/C 223238388 and the Limited Liability Company – Georgian Fashion Company B/C 404860254.
The liquidation of the LLC Cleaning and Organisation of Public Services and Amenities atthe Akhalgori Municipality was completed on 3 October 2012 while the initiation of the liquidation process was registered on 23 January 2012. The enterprise was liquidated about eight months after the official start of the liquidation procedure and, therefore, the terms prescribed by the Law for the Liquidation of Enterprises (minimum of 20 days, maximum of four months and more, if necessary) have not been violated.
We obtained information on the said company from the payers’ registry of the Revenue Service. Based upon the information provided on payers, no lien/mortgage or seizure/ban is registered on the LLC Cleaning and Organisation of Public Services and Amenities atthe Akhalgori Municipality.
The liquidation of the LLC Georgian Fashion Company was accomplished on 2 October 2012 while the opening of the liquidation process was registered on 10 September 2012. No infringement of terms prescribed for the liquidation process has been observed in this case either. The enterprise was liquidated 22 days after the start of the liquidation process was registered. The payers’ registry of the Revenue Service registers no lien/mortgage or seizure/banfor this company either.
Based upon the official information, only two companies were liquidated in the period from 1 through 5 October of 2012 and not tens of companies. Moreover, neither of these two has been liquidated in one day, contrary to the claimsof the Minister of Finance.
Conclusion In line with the Doing Business ranking, Georgia holds the 88th position in terms of the easiness of the bankruptcy procedure which manifests an advance by four positions. The ranking covers a total of 189 countries and so the 88th
place is rather an intermediate position than the last one.
As for the companies liquidated between 1 and 5 October of 2012, the official sources register solely two liquidated companies in this period.Bearing in mind the abovementioned, we rate Nodar Khaduri’s statement: “Even the Doing Business ranking, which has promoted us to the eighth position, assesses the process of shutting down a business in Georgia as the hardest of all. Last year, however, in the period between 1 and 5 October, tens of companies were shut down in a day. Their liquidation took only a single day,” as FALSE.